Capital gains is taxed well below the normal tax rate so it really does not add up to as much as you might think. "As a share of total federal revenue from all sources, capital gains taxes averaged about 4.2 percent from 1995 through 2009." https://pocketsense.com/percent-irs-revenue-comes-capital-ga...
Further, it's skipped when someone inherits money making death a massive tax break.
PS: 34% of federal revenue comes from payroll taxes which are very regressive, 47% from income taxes which include capital gains which are progressive. Net result a surprisingly flat effective tax rate.
You would be quite wrong. If you count all taxes, rather than cherry-picking the most progressive ones, the top 20% pays about 2/3rds of all taxes. They also earn about 2/3rds of all income. The total tax rate in terms of all tax paid divided by income earned is remarkably flat: the bottom 20% has an effective rate of about 20%, and the top 1% has an effective rate of about 34%.
This is the Washington Examiner. They exist to be a conservative mouthpiece. Not a single thing they write is unbiased or even has any pretensions to be.
> Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2013 (see Figure 1). Households in other income groups received considerably smaller shares of before-tax income and paid considerably smaller shares of federal taxes.
I imagine that "more than two thirds of all federal taxes" is actually correct. There are two important differences from the article: "more than two thirds" is dramatically lower than "95%," and "all federal taxes" is not the same as "taxes."
I'm complaining about a media outlet lying by pretending that the federal income tax is the only tax that matters. You've responded by linking to a CBO publication that considers other taxes, not just income tax. That reinforces my point.
> In this report, CBO analyzed the distribution of four types of federal taxes: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes.
So it's not like it's including sales or property taxes or whatever else. For all intents and purposes, that's "income" tax.
And the report is from 2013. This Washington Examiner article explicitly states (with a WSJ link for source) that the disparity has dramatically widened in recent years:
> That may be the highest ever. Just two years ago, it was 84 percent, according to the Wall Street Journal.
Federal income tax provides nearly half of all federal revenue. It's not the only tax that matters, but it's certainly the most important and most visible. And any reforms will have the most impact to average citizens of any tax reform.
Not only that, but they also pretend that it's some static 20%. Not true. I've been in both the top 1% and the bottom 10% in my mid-20s.
We're all in this together. Let's work hard to make it better for everyone and let's be happy to pay higher taxes when we're winning and let's be grateful that there is help when we're struggling. Let's let some have a nicer life if they're working really hard, but let's also make sure that we all get help when we need it.
I'm not the parent commenter, but I would say that given the bottom 20% pays an effective rate of ~20%, an effective rate of ~34% for the top 1% is pretty low, relatively speaking.
But the effective rate gets much closer to 50% as your income goes higher and higher, no?
Within that 1%, you have people who make several hundred thousand dollars a year (I think they make up the majority of the 1%?), and their effective tax rate is closer to 34%. Whereas those who make millions a year, their effective rate is much higher, closer to 50%. Unless my math is off.
I doubt the people who make millions a year pay 50%. Those people tend to be good at structuring much of their income as capital gains, which is taxed much lower. Even tax on regular income tops out at about 43% including payroll taxes. It could go higher if you include other taxes such as sales taxes or state income taxes.
It also doesn’t help that his analysis leaves out the massive skew of income to the top 1% of that 20%. Obviously the middle quintile doesn’t pay much of the total pie, but that’s only because it’s share of income is so small to begin with.
And even if it did include property taxes and such paid by rich people who own land, it wouldn't include the fact that such payments are funded by the rents paid by the poor people who rent the land.
Make more money -> spend more money -> pay a lot in sales taxes.
> payroll taxes
Make more money -> pay more in payroll taxes
> pretending that "tax" and "income tax" mean the same thing.
I dunno about you, but income taxes take the biggest bite out of my ass. You're right that the top 20% doesn't pay 95% of _all_ taxes combined, but I guarantee you they pay far more than 20%. More than 50%, even. What point are you trying to make? That the top 20% don't pay enough in taxes?
> I dunno about you, but income taxes take the biggest bite out of my ass.
If that's true, it's because you're in the top 20%. The average person pays far more in payroll tax than income tax, not to mention other taxes. Remember, payroll tax is 15.3% starting from the first dollar of income. There are no deductions like there are for income tax. And payroll tax goes down to 2.9% on earnings above $127,200/year.
The median wage in the US is around $45,000/year. A single person making that much money with no dependents and no special deductions will pay about $4,700/year in federal income tax and about $7,000/year in payroll taxes. Dependents and other deductions will cut the income tax amount but will not touch the payroll tax.
I'm not the GP, but the point I would make is that the top 20% pay an appropriate amount of tax commensurate with their (our) income. They (we) pay about two-thirds of all taxes, and make about two-thirds of all income. So headlines claiming that they (we) pay disproportionately-high taxes are trying to make a point, and lying to do so.
As another commenter said, if income taxes are your biggest bite, that says more about you than you realize. Depending on what you earn, FICA often ends up being the biggest bite at 15.3% of every dollar your earn. For some people, sales tax could be the biggest bite, or at least a bigger bite than income tax.
Yes, sales tax is not federal. It's still a tax that people pay. To talk about "95% of taxes" and exclude sales tax is dishonest.
Payroll tax is the Social Security and Medicare taxes. It's 15.3% up to $127,200/year with no deductions (i.e. the very first dollar you earn is taxed at that rate), then it drops to 2.9%. People typically don't realize how much it is because it's split into an employee and an employer half. The number printed on your paycheck will only show a 7.65% rate, but the employer is also paying another 7.65%.
Question: If there was no employer side of FICA, is it likely that employees in the bottom 80% get a higher paycheck, since the employer has more money available? Or would most businesses invest that in other areas? Because otherwise you can also consider all other corporate taxes as taxes on employees, because without them there is more that they can spend on payroll.
Edit: I'd also like to explore what would happen if the entire 15% is invested in a 401k equivalent instead of receiving social security / medicare, how much more the average person would get in retirement.
I think payroll taxes are different from other corporate taxes in that they are a direct tax on wages, and thus directly increase the business's cost of labor. Businesses don't really care what part of their labor costs are taxed on their end, what part is taxed on the other end, what part goes to various benefits, etc. They just care that it costs them $X for a given employee.
It is quite possible that reducing the employer side of FICA wouldn't translate into a 1-to-1 higher paycheck, or even any increase at all. But the same is true of the employee's side, or of regular income tax, or any other tax.
Which (roughly) correlates with the percentage of total wealth controlled by the top 20%. It would be interesting to see, as granularly as possible, how total contribution to tax and total ownership of wealth vary across each percentile.
And yet they keep getting richer. One of the reasons is what the tax income is spent on. For example military expenditure benefits primarily elites and high tech business not so much the general population.
The rich getting richer are not accumulating wealth under taxable income. I absolutely agree to an extremely high top income tax bracket where you effectively cap salaried and paid compensation but anyone legitimately rich is making money off of money through capital gains, not through labor.
The problem with income tax in the US is that there are two classes of people - labor and owners - and owners are taxed substantially less at all tax brackets than labor, and have much less progressive taxation, and have never had limits put on the amount of money they can make through ownership. On purpose.
No wonder the rich only get richer, the fundamentals of the tax system are setup to bias everything in their favor.
This is only counting people who file a tax return. From TFA: "The top 20 percent of folks who file a tax return, the top 20 percent, pay 95 percent of the taxes."
That's the context without which such a statistic as in TFA is meaningless.
The other point to make is that the tax plan currently being debated in Congress does not give the middle class a tax break after netting out the proposal to do away with deductions for state and local taxes.
Great question! It turns out the top 20% earn about two-thirds of the income and pay about two-thirds of the total taxes (all taxes, not just federal income taxes). So all in all, it seems reasonable.
In 2014, the bottom 50 percent of taxpayers (those with AGIs below $38,173) earned 11.27 percent of total AGI. This group of taxpayers paid approximately $38 billion in taxes, or 2.75 percent of all income taxes in 2014.
In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.
---And yet 0% of the Top 1% were willing to trade incomes with the bottom 50% so they could pay less taxes....hum...
It's only a huge mistake if your goal is a rational fact-based discussion. If your goal is to cut taxes on the wealthy, then pretending otherwise is quite smart. Articles talking about income tax as if it was the only tax that mattered show up constantly, and it's not a mistake, it's a deliberate campaign of misinformation.
In FY 2018, total US government revenue, federal, state, and local, is “guesstimated” to be $6.66 trillion, with federal $3.65 trillion; state $1.67 trillion; local $1.33 trillion.
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[ 7.0 ms ] story [ 43.7 ms ] threadInclude sales taxes, payroll taxes, and everything else, then see what the numbers look like.
Anybody who tells you that X% of the population pays Y% of all income tax without mentioning other taxes is trying to deceive you.
Further, it's skipped when someone inherits money making death a massive tax break.
PS: 34% of federal revenue comes from payroll taxes which are very regressive, 47% from income taxes which include capital gains which are progressive. Net result a surprisingly flat effective tax rate.
See: http://ctj.org/pdf/taxday2015.pdf
Pretending otherwise is biased.
PS: Federal 'income' taxes amount to less than 1/4 of total US tax revenue and less than 1/2 of federal tax revenue.
> Households in the highest income quintile received a little more than half of total before-tax income and paid more than two-thirds of all federal taxes in 2013 (see Figure 1). Households in other income groups received considerably smaller shares of before-tax income and paid considerably smaller shares of federal taxes.
https://www.cbo.gov/publication/51361
I'm complaining about a media outlet lying by pretending that the federal income tax is the only tax that matters. You've responded by linking to a CBO publication that considers other taxes, not just income tax. That reinforces my point.
> In this report, CBO analyzed the distribution of four types of federal taxes: individual income taxes, payroll (or social insurance) taxes, corporate income taxes, and excise taxes.
So it's not like it's including sales or property taxes or whatever else. For all intents and purposes, that's "income" tax.
And the report is from 2013. This Washington Examiner article explicitly states (with a WSJ link for source) that the disparity has dramatically widened in recent years:
> That may be the highest ever. Just two years ago, it was 84 percent, according to the Wall Street Journal.
(https://www.wsj.com/articles/top-20-of-earners-pay-84-of-inc...)
Federal income tax provides nearly half of all federal revenue. It's not the only tax that matters, but it's certainly the most important and most visible. And any reforms will have the most impact to average citizens of any tax reform.
I have no problem with analyzing a subset of taxes. I have a problem with analyzing a subset of taxes and lying about it by just saying “taxes.”
Compare someone making 1 billion per year in capital gains from foreign investments vs someone making 30k per year in social security.
We're all in this together. Let's work hard to make it better for everyone and let's be happy to pay higher taxes when we're winning and let's be grateful that there is help when we're struggling. Let's let some have a nicer life if they're working really hard, but let's also make sure that we all get help when we need it.
When going from a low income to a medium income you get the steepest changes, then it flattens when you move into a high income.
Within that 1%, you have people who make several hundred thousand dollars a year (I think they make up the majority of the 1%?), and their effective tax rate is closer to 34%. Whereas those who make millions a year, their effective rate is much higher, closer to 50%. Unless my math is off.
Make more money -> spend more money -> pay a lot in sales taxes.
> payroll taxes
Make more money -> pay more in payroll taxes
> pretending that "tax" and "income tax" mean the same thing.
I dunno about you, but income taxes take the biggest bite out of my ass. You're right that the top 20% doesn't pay 95% of _all_ taxes combined, but I guarantee you they pay far more than 20%. More than 50%, even. What point are you trying to make? That the top 20% don't pay enough in taxes?
If that's true, it's because you're in the top 20%. The average person pays far more in payroll tax than income tax, not to mention other taxes. Remember, payroll tax is 15.3% starting from the first dollar of income. There are no deductions like there are for income tax. And payroll tax goes down to 2.9% on earnings above $127,200/year.
The median wage in the US is around $45,000/year. A single person making that much money with no dependents and no special deductions will pay about $4,700/year in federal income tax and about $7,000/year in payroll taxes. Dependents and other deductions will cut the income tax amount but will not touch the payroll tax.
As another commenter said, if income taxes are your biggest bite, that says more about you than you realize. Depending on what you earn, FICA often ends up being the biggest bite at 15.3% of every dollar your earn. For some people, sales tax could be the biggest bite, or at least a bigger bite than income tax.
Also, what do you mean by "payroll tax"?
Payroll tax is the Social Security and Medicare taxes. It's 15.3% up to $127,200/year with no deductions (i.e. the very first dollar you earn is taxed at that rate), then it drops to 2.9%. People typically don't realize how much it is because it's split into an employee and an employer half. The number printed on your paycheck will only show a 7.65% rate, but the employer is also paying another 7.65%.
Edit: I'd also like to explore what would happen if the entire 15% is invested in a 401k equivalent instead of receiving social security / medicare, how much more the average person would get in retirement.
It is quite possible that reducing the employer side of FICA wouldn't translate into a 1-to-1 higher paycheck, or even any increase at all. But the same is true of the employee's side, or of regular income tax, or any other tax.
https://taxfoundation.org/summary-latest-federal-income-tax-...
The problem with income tax in the US is that there are two classes of people - labor and owners - and owners are taxed substantially less at all tax brackets than labor, and have much less progressive taxation, and have never had limits put on the amount of money they can make through ownership. On purpose.
No wonder the rich only get richer, the fundamentals of the tax system are setup to bias everything in their favor.
5) Top 20% pay 95% of taxes.
The other point to make is that the tax plan currently being debated in Congress does not give the middle class a tax break after netting out the proposal to do away with deductions for state and local taxes.
Not that you'd get that from that headline!
In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.
---And yet 0% of the Top 1% were willing to trade incomes with the bottom 50% so they could pay less taxes....hum...
The US government collects ~$6.7 trillion each year, federal income taxes collected are only $1.37 trillion (2014).
Pretending otherwise is a huge mistake.
https://www.usgovernmentrevenue.com/year_revenue_2018USbf_19...
https://www.usgovernmentrevenue.com/total
https://taxfoundation.org/sources-state-and-local-tax-revenu...
If corporations paid their fair share maybe you could pay less.
Or are corporations counted in the top 20%, because, hey: corporations are people too!
Even if it is true that Top 20% pay 95% of taxes, that is as it should be.